"You're getting out of a Mercedes to go to the New York Federal Reserve," Blankfein responded. "You're not getting out of a Higgins boat on Omaha Beach." At least Blankfein recognized that if they screwed up the sun would rise for them the next day no matter what. And they'd probably still get to keep that house in the Hamptons. We didn't have this luxury. You screw up in combat, it's over with. The wife gets a folded flag and a form letter signed by someone she's never met. This type of environment requires you to execute at the top of your game. While you get to go home if you have a bad day trading, why wouldn't you want to execute with the highest level of precision so you can win more often than not? So by applying the same methodologies that allowed us to win in combat situations we have been able to crush it on Wall Street. Why? Our combat plans defined our objective, our strategic mindset, our targets, our commit criteria (which is simply our go or no go decision), the specific tactic we intend to use to achieve our objective, how we are going to employ the tactic, our courses of action (which are the steps we are going to follow executing the plan), and contingency plans if things are not going our way. Rule number one with planning: plans survive until first contact with the enemy, so you must have contingency plans. And finally combat plans spelled out our exit criteria, when to get out and how to get out. You have to plan for combat this way because combat is dynamic, it's dangerous and the battlefield is in constant change (the "fog of war") and you don't know where your enemy will strike from next. Sound familiar? You need to discover the "unknown unknowns" or at least prepare for them. Where did this financial crisis come from, or how about Enron or WorldCom? Which bubble is going to burst next? What's going to happen with the European debt crisis, or closer to home, California and Illinois? Is anyone cooking the books at your favorite company? When is the FDA going to spring a surprise ruling on your favorite bio tech company?
This definition of combat applies directly to the financial markets and trading. We identify threats that could potentially knock us down in each and every trade. By negating those threats or minimizing them (hedging), we win. At Fox 3 Options, trading is combat. This may seem like a lot but once this process is ingrained in your brain housing group it will be as natural as breathing. We've partnered with Options University to create a financial training system like no other called Top Gun Options. This program will teach you the discipline and risk management needed to achieve superior execution in your trading. Check it out at
www.fox3options.com. Firing Line: My next column will lay out in intricate detail a sample trade plan that we employ for an options position to ensure that we win in our trading with maximum profit or eject with minimum loss. If you don't treat your trading like it's combat, someone like me is going to take you down... I promise. Time for you to even the odds.